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This afternoon, French President Francois Hollande will expand upon his New Year announcement that French companies who agree to hire more workers could pay lower labour taxes in return and find themselves less tied up in red tape. Unemployment is running near to 12 percent and Hollande’s vow to get it falling by the end of 2013 fell short.

Unfortunately, the announcement has been eclipsed by his threat of legal action after a French magazine reported he was having an affair with an actress. France tends to overlook its politicians’ peccadilloes but with the economy in a hole, Hollande risks facing the charge that he should be focusing squarely on that.

To complicate matters his partner, Valerie Trierweiler, has been admitted to hospital following the reports. She will stay there for a number of days yet.
Given this is one of only two news conferences that Hollande has promised to give each year it’s hard to see how he can avoid it being hijacked by his personal life. As boxing promoter Don King was fond of saying: there are two chances, slim and none and Slim just left town.

The usual omerta about politicians’ private lives has been broken with opposition UMP leader Jean-Francois Cope calling it disastrous for the image of the presidency.

Even so, the odds are this squall will blow over so the far bigger question is about Hollande’s appetite for economic reforms. He has attracted criticism from abroad for being too timid in his shaking up of the labour market and the welfare state and is hoping this policy will prove to be a game changer.
It is risky. Giving a tax cut to companies means either raising taxes on ordinary people, cutting back state spending or both – not a vote winner any way round. But with his approval ratings at rock bottom, Hollande may feel he has little left to lose. He has already declared it time to stamp out abuses of a generous welfare state, and cut public spending to create room for tax reductions after a series of rises.

For this presidential term at least, it feels like a now or never moment. Falter and the euro zone’s recovering economies – particularly Spain which said yesterday it grew by 0.3 percent in the last quarter of 2013 – will start looking like better bets.

Voting has begun in Egypt’s referendum on a rewritten constitution. The government is hoping for a strong turnout to prove political support for a political roadmap meant to lead to elections within six months. It is also seen as a vote on army chief General Abdel Fattah al-Sisi, who toppled President Mohamed Mursi of the Muslim Brotherhood in July.

Approval of the rewritten constitution, which strips out disputed Islamist language while strengthening state institutions that defied Mursi: the military, the police and the judiciary, appears a foregone conclusion. Mursi’s outlawed Muslim Brotherhood is urging a boycott while many Egyptians who backed his overthrow are expected to vote ‘yes’ in a show of support for the army-backed order that replaced Islamist rule.

Voting extends into Wednesday and a strong “yes” will likely prompt Sisi to contest elections in the most populous Arab state which he would be favourite to win.

Bundesbank Vice President Sabine Lautenschlaeger told European parliamentarians on Monday that low interest rates carry risks and that some of the ECB’s measures should be exited as soon as possible.
No great surprise she has shown hawkish talons but it sounds like she’s closer to the implacable Bundesbank chief Jens Weidmann than the more pragmatic Joerg Asmussen, the man she replaces. The new pick for the ECB’s executive board will speak in Berlin today about the state of banking union.
ECB Vice-President Constancio and Italy Economy Minister Saccomanni attend a business conference in Milan.

UK inflation is forecast to hold at 2.1 percent, just above the Bank of England’s two percent target, so no pressure from that source for policy to be tightened. For much of Europe the threat is of too little not too much inflation. Sweden’s CPI rate is expected to drop to -0.1 percent today.

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Based in London, I run the economics, economic policy and markets cover from the EMEA region. Previously, I was Chief UK Political Correspondent for seven years and have also been economics correspondent as well as holding general news and market reporting posts over a 20-year career.